Correlation Between Constellation Brands and SNDL

Can any of the company-specific risk be diversified away by investing in both Constellation Brands and SNDL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Constellation Brands and SNDL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Constellation Brands Class and SNDL Inc, you can compare the effects of market volatilities on Constellation Brands and SNDL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Constellation Brands with a short position of SNDL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Brands and SNDL.

Diversification Opportunities for Constellation Brands and SNDL

0.04

Correlation Coefficient

Constellation Brands  SNDL

Significant diversification

The 3 months correlation between Constellation and SNDL is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc and Constellation Brands is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Constellation Brands Class are associated (or correlated) with SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Constellation Brands i.e., Constellation Brands and SNDL go up and down completely randomly.

Pair Corralation between Constellation Brands and SNDL

Considering the 90-day investment horizon Constellation Brands Class is expected to generate 0.44 times more return on investment than SNDL. However, Constellation Brands Class is 2.27 times less risky than SNDL. It trades about -0.05 of its potential returns per unit of risk. SNDL Inc is currently generating about -0.05 per unit of risk. If you would invest  25,065  in Constellation Brands Class on September 12, 2024 and sell it today you would lose (1,078) from holding Constellation Brands Class or give up 4.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Constellation Brands Class  vs.  SNDL Inc

Constellation Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Constellation Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Constellation Brands and SNDL

The main advantage of trading using opposite Constellation Brands and SNDL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Brands position performs unexpectedly, SNDL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in SNDL will offset losses from the drop in SNDL's long position.

The idea behind Constellation Brands Class and SNDL Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.